Prime London rents will rise for next five years, experts predict

Rents in prime London and its commuter belt are expected edge higher this year due to the widening supply-demand imbalance in the capital’s rental market, according to Savills. 

The high-end letting agency forecasts that rents will rise by 10.9% over the next five years following three years of falls, while the commuter belt is expected to see rents increase by 6.7% over the same period. 

Rental values bottomed out in London just over six months ago and recorded growth averaging 0.9% across the full year, having fallen by an average of -7.7% since the 2016 referendum, and -14.9% in prime central London.   

Prime west London, from Hammersmith to Ealing, and prime south west London, stretching from Clapham to Richmond, saw the strongest annual increases, rising 2.9% and 1.6% respectively across 2019.

London’s prime commuter belt is also showing signs of rental recovery, though more gradual. Rents fell by -0.5% over 2019, bringing total five year falls to -2.6%. 

5-year prime rental forecasts 2020-2024

Source: Savills Research 

Capital growth is expected to outpace rental growth over the next five years which will underpin landlord returns.

Across prime central London capital values are expected to rise by 20.5%, across other prime London locations by 11.5%, and by up to 14.2% across the wider commuter zone.

“This will be welcome news for landlords, particularly given the less favourable tax environment,” said Gaby Foord, Savills research analyst.  “However, rental recovery will be susceptible to the outcome of the Brexit negotiations, fluctuations in stock levels and new policy intervention.

“But the key to achieving a rental premium and avoiding costly extended void periods, will be to offer stock of the highest condition to compete with new build stock as it comes to market.”

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